Napster was one of the biggest online music file sharing service launched back in 1991 and was later shut down in July 2001. Napster’s facilitation for the download of copyrighted material had caused a great deal of damages to the industry, eventually becoming the cause for its shutdown.
Illegal downloading has had a great effect on the music industry revenues/earnings. Some negative, while some have even been classified as positive by different analysts. Researchers believe that most downloads are done by teenagers and college kids over peer-to-peer networks such as KaZaa, LimeWire etc.
As a penalty for all the damage caused by Napster, it had to pay around $26 million to the music creators as a settlement for the loss caused by illegal music downloads. Also, $10 million were paid as to account for the damages done to royalties. The RIAA – Recording Industry Association of American brought the case into notice by filing a suit against Napster in December 1999.
The damages caused by Napster were only by a single service. Several different services similar to Napster exist today, providing illegal music download/sharing services to their users. These illegal downloads eventually translate into the loss of creative artists with lesser sales of CDs and buying of original records.
Artists, producers, directors and all related stakeholders are unable get the royalties, profits and fees they would have earned with legal selling of their records. Moreover, the recording industries supporting all these recordings also become a part of the suffering with lesser revenues or profits.
According to recent statistics, 85 percent of the records released don’t even generate enough revenues to cover their costs. In order to subsidize the less profitable chunk, recording companies depend heavily on the profitable 15 percent to keep their business up and running. (Negative Effects on the Music Industry, 2006)
Almost 95 percent of the music is still